Top Oil Producers Agree To Boost Output From August

An oil pumpjack operates in Signal Hill, south of Los Angeles, California on April 21, 2020, a day after oil prices dropped to below zero as the oil industry suffers steep falls in benchmark crudes due to the ongoing global coronavirus pandemic. Frederic J. BROWN / AFP.

 

The world’s leading oil producers agreed on Sunday to continue to modestly boost output from August reaching a compromise after the United Arab Emirates blocked a deal earlier this month.

An OPEC+ meeting decided to raise output by 400,000 barrels per day (bpd) each month from August to help fuel a global economic recovery as the pandemic eases, the group’s Vienna-based secretariat said in a media statement.

The grouping will “assess market developments” in December, it said. The deal also extends a deadline on capping output from April next year to the end of 2022.

Earlier in July, negotiations of OPEC+ members on easing production cuts became deadlocked due to a row between the world’s largest oil exporter Saudi Arabia and neighbour the United Arab Emirates.

Since May, the 23-member grouping, which also includes Russia, had raised oil output bit by bit, after slashing it more than a year ago when the coronavirus pandemic crushed demand.

The aim is to return to pre-pandemic production levels, with the alliance still pumping 5.8 million bpd less than it was before the pandemic.

‘Consensus building’

In a rare challenge to OPEC leader Saudi Arabia, the UAE rejected the proposed deal earlier this month as “unjust”, leading to a stalemate.

But in a compromise, Sunday’s discussions agreed to adjust output quotas next May for the UAE, Iraq, Kuwait, Russia and Saudi Arabia itself, meaning their actual cuts will be less.

Saudi Energy Minister Prince Abdulaziz bin Salman, who chairs the OPEC group, declined to say how the new quotas were decided and beneficiaries chosen, saying it had been part of “consensus building”.

Russian Deputy Prime Minister Alexander Novak told public television channel Rossia 24 that the meeting confirmed “our desire to be constructive and to find a consensus”.

“The pandemic is not yet overcome, but we are seeing that thanks to vaccination all over the world, demand for our production is recovering as is the use of cars and air planes,” he said.

“It is therefore very important for us to fulfil our responsibilities and allow a recovery of the world economy.”

‘Flurry of talks’

Observers had expected a deal.

“A flurry of talks were held on Saturday to try and close the gap,” tweeted Herman Wang, an editor of S&P Global Platts, which specialises in coverage of the energy industry, ahead of the meeting, which lasted just about one hour.

Oil prices — which had already been sliding owing to concerns about the global economy — plummeted in April 2020 as coronavirus spread around the world and battered global consumption, transport and supply chains.

OPEC+ then decided to withdraw 9.7 million bpd from the market and to gradually restore supplies by the end of April 2022 — a deadline that has now been extended.

Benchmark oil prices rebounded as a result and have reached two-and-a-half-year highs. The main international oil contracts have been trading around $75 per barrel.

Economic rivalry was at the heart of the feud between OPEC members as the Gulf states try to cash in on their vast oil reserves as they face the beginning of the end of the oil era.

Disagreements between Saudi Arabia and UAE — once inseparable allies — are usually resolved behind palace walls and rarely spill into the open.

Ministers from OPEC+ countries have gathered frequently since the spread of the new coronavirus to assess the market with the next meeting scheduled for September 1, according to Sunday’s statement.

AFP

Major Oil Producers Seeking Output Boost To Meet On Sunday

OPEC

 

 

Major oil producers seeking to boost output will meet on Sunday, OPEC said, after negotiations earlier this month became deadlocked over plans to gradually ease production cuts.

The OPEC+ grouping, which includes Saudi Arabia and Russia, will meet via videoconference at 1000 GMT on Sunday, the Vienna-based OPEC Secretariat said in a statement.

The group’s 23 members cancelled a meeting on July 5 that was supposed to overcome an impasse over crude output levels.

Since May, the group has raised oil output bit by bit, after slashing it more than a year ago when the coronavirus pandemic crushed demand.

At stake is a proposal that would see the world’s leading oil producers raise output by 400,000 barrels per day (bpd) each month from August to December.

That would add two million bpd to markets by the end of the year, helping to fuel a global economic recovery as the coronavirus pandemic eases.

A further proposal seeks to extend a deadline on capping output from April 2022 to the end of 2022.

But holding out against the new deal was the United Arab Emirates, which criticised the terms of the extension as unjust.

Oil prices, which had already been sliding owing to concerns about the global economy, plummeted in April 2020 as coronavirus spread around the world and battered global consumption, transport and supply chains.

OPEC+ decided to withdraw 9.7 million bpd from the market and to gradually restore supplies by the end of April 2022. Benchmark oil prices rebounded as a result.

AFP

Oil Demand Surges, Market Set For Deficit And Volatility – IEA

 

 

Oil demand surged last month as rising vaccination rates helped underpin robust economic activity, but with OPEC+ nations pumping less than needed prices are set to be volatile until it reaches a deal to raise output, the IEA warned on Tuesday.

A meeting of OPEC+ nations earlier this month was deadlocked over plans to gradually ease production cuts, imposed to reverse the plunge in oil prices at the start of the coronavirus pandemic as demand tumbled.

But demand is rebounding, with the International Energy Agency estimating it surged by an estimated 3.2 million barrels per day (mbd) last month, which is more than a third of the overall drop in demand last year.

The IEA expects oil demand to rise by another 3.3 mbd in the three months from July. That is more than twice as large as the seasonal increase registered during the same period in 2019, which the IEA said is a result of easing Covid restrictions and increasing vaccination.

While OPEC+ had been set to gradually raise oil output, the stalemate means production is frozen at current levels until an agreement is found.

“Oil prices reacted sharply to the OPEC+ impasse last week, eyeing the prospect of a deepening supply deficit if a deal cannot be reached,” the IEA said in its latest monthly report.

The main international oil contracts have been trading around $75 per barrel, and some analysts see a spike to $100 as possible.

But there is another possibility: the overall OPEC+ deal breaks down and producers open the taps and try to gain market shares, which would likely lead to prices crashing.

“At the same time, the possibility of a market share battle, even if remote, is hanging over markets, as is the potential for high fuel prices to stoke inflation and damage a fragile economic recovery,” said the IEA.

Investors have been worried that a surge in inflation could force central banks to raise their ultra-low interest rates, thus removing one of the main supports for the economic recovery.

The IEA said that absent increased production by OPEC+ nations the market for crude is set to tighten, with additional stocks built up during the pandemic already gone and reserves running below the long-term average in industrialised nations.

Furthermore, it forecasts the biggest draw upon stocks in at least a decade will happen this quarter as OPEC+ pumps nearly 2 mbd less than market demand. The gap will rise to 3.2 mbd in the final three months of the year.

“Oil markets are likely to remain volatile until there is clarity on OPEC+ production policy,” the IEA warned.

It also noted that a spike in prices would not be in the long-term interest of oil producers.

“While prices at these levels could increase the pace of electrification of the transport sector and help accelerate energy transitions, they could also put a drag on the economic recovery, particularly in emerging and developing countries,” the IEA report said.

While the agency, which advises oil-consuming nations, foresees oil demand recovering along with the global economy, it doesn’t discount the pandemic continuing to weigh upon the market.

“Covid-19 remains a significant threat to oil demand growth in the near- to medium-term, in particular in the non-OECD.”

Emerging nations not in the OECD group of advanced nations — such as China and India — were responsible for much of the growth in the global economy before the pandemic.

OPEC+ Expected To Move To Cool Overheating Oil Market

In this file photo taken on November 29, 2016, the logo of OPEC is pictured at the OPEC headquarters on the eve of the 171th meeting of the Organization of the Petroleum Exporting Countries in Vienna, Austria. JOE KLAMAR / AFP
In this file photo taken on November 29, 2016, the logo of OPEC is pictured at the OPEC headquarters on the eve of the 171th meeting of the Organization of the Petroleum Exporting Countries in Vienna, Austria. JOE KLAMAR / AFP

 

 

 

The OPEC+ group of oil-producing countries will meet on Thursday and are expected to agree to boost production in August in order to meet demand and dampen recent price rises.

While improvement in demand drove the group’s most recent rises in production, now price levels will also be a guiding force behind the club’s decisions.

After demand dropped when the coronavirus pandemic broke out last year and crude prices briefly turned negative, the club led by Saudi Arabia and Russia imposed sharp production cuts in order to raise prices.

The 13 members of OPEC and their 10 allies in the OPEC+ grouping were rewarded by seeing prices for the two contracts of reference, Brent and WTI, recover to around $75 per barrel, levels not seen since October 2018.

However that strategy has worked almost too well and the group is currently following a policy of cautiously turning the taps back on.

– ‘Rising pressures’ –
While on the face of it buoyant prices are a boon for producers — and some of them will be pushing to increase output to cash in — there are also risks.

Russia is expected to favour increasing output, as it has done at several recent OPEC+ meetings.

Moscow “may be more inclined to support a production increase in order to ensure a higher market share while limiting the risk of rising non-OPEC production,” according to Ole Hansen from Saxobank.

“Pressure will likely not only come from within the group, but there will also be growing calls from key consumers to cool the market down, as countries come out of the other side of Covid-19 lockdowns,” says Warren Patterson of ING bank.

India is a notable example. The world’s third-largest consumer of crude has been hit by a vicious coronavirus wave in recent months and has urged OPEC+ “to phase out crude output cuts to temper rising inflationary pressures”, noted Stephen Brennock from PVM.

“If prices remain this high, this will eat into consumers’ disposable incomes and potentially choke economic growth, which, over time, will weigh on crude prices,” explained Fawad Razaqzada of Thinkmarkets.

The OPEC+ states have left themselves soom room for manoeuvre as they are currently still planning to leave 5.8 million barrels per day (bpd) of crude in the ground over the month of July that they could easily extract and sell.

Most investors are currently expecting a modest rise of some 500,000 bpd over the month of August.

But OPEC+ always has the capacity to surprise.

– ‘Travel intensive summer’ –
The outlook for crude demand has been steadily improving in recent months.

In its last report in mid-June, the International Energy Agency (IEA) forecast that global demand would outstrip pre-pandemic levels by the end of 2022.

Jeffrey Halley of Oanda noted that demand will be boosted as “Americans embrace a travel intensive summer” on cars, planes, and cruises, as well as due to the fact that “the global vaccination rollout is improving”.

As ever in recent months, the cartel will have to pay attention to diplomatic developments relating to one of its members in particular — Iran.

If current negotiations on a US return to the 2015 Iran nuclear deal are successful, the country may be able to resume exporting oil at levels prior to 2018, when former US President Donald Trump dramatically withdrew from the deal and imposed sanctions.

However, this would be unlikely to affect the market until later in the year and there are plenty of other factors at play.

The spread of the highly contagious Delta variant of the coronavirus has led to fresh restrictions being imposed in Australia, South Africa and Thailand.

Since December the OPEC+ countries have been meeting every month in order to calibrate their strategy as closely as possible to the latest developments.

OPEC Sees Rising Oil Demand As It Plans To Open Taps

In this file photo taken on November 29, 2016, the logo of OPEC is pictured at the OPEC headquarters on the eve of the 171th meeting of the Organization of the Petroleum Exporting Countries in Vienna, Austria. JOE KLAMAR / AFP
In this file photo taken on November 29, 2016, the logo of OPEC is pictured at the OPEC headquarters on the eve of the 171th meeting of the Organization of the Petroleum Exporting Countries in Vienna, Austria. JOE KLAMAR / AFP

 

 

OPEC upgraded its expectations for global oil demand growth in 2021 Tuesday on expectations of a growth rebound, as the oil-producing countries’ organisation plans to lift output in the months ahead.

The monthly report’s forecast of a year-on-year increase by six million barrels per day (bpd) was slightly higher than a March prediction, which had already been upgraded.

Such an increase would push global demand to 96.5 million bpd in 2021 after last year’s tumble due to coronavirus restrictions.

“Oil demand in the second half of 2021 is projected to be positively impacted by a stronger economic rebound than assumed last month, supported by stimulus programmes and a further easing of Covid-19 lockdown measures,” OPEC said.

Further cause for optimism later this year came from “an acceleration in the vaccination rollout, largely in the OECD region” — although many developed economies’ performance in the first half has proven sluggish.

Convened under the OPEC+ alliance, which also includes Russia and others, oil producers decided in April to gradually roll back output cuts initially made to shore up prices.

The move was motivated by rising optimism as coronavirus vaccination campaigns picked up steam.

OPEC’s own output grew by 0.2 million bpd last month, to just over 25 million, according to indirect sources cited in the report.

Most of the growth came from a boost to Iranian production.

While Iran remains far short of output levels seen several years ago, it is in talks in Vienna to save an international deal under which the US agreed to lift some sanctions in exchange for curbs on Tehran’s nuclear programme.

OPEC+ Approves Oil Output Increases From May

OPEC+ group is enforcing drastic cuts in production.

 

Oil-producing countries grouped together under the OPEC+ alliance led by Saudi Arabia and Russia agreed on output increases as of next month at a ministerial meeting on Thursday.

A statement from the alliance said that they had agreed to boost output by “no more than 0.5 million” barrels per day (bpd) in May, June and July.

The decision comes despite the expectation ahead of the meeting that the bloc would err on the side of caution.

READ ALSO: Czech Republic’s ‘Wealthiest Man’ Dies In Alaska Helicopter Crash

Addressing reporters after the meeting, Saudi Energy Minister Prince Abdelaziz bin Salman stressed that the decision could still be “tweaked” in the alliance’s monthly meetings.

Before the meeting Prince Abdelaziz said that “the reality remains that the global picture is far from even, and the recovery is far from complete”.

Salman praised the OPEC+ alliance nations for more than fulfilling their commitments to restrain output.

Under its current agreement, the OPEC+ group — made up of the Organization of Petroleum Exporting Countries and its allies including Russia — is enforcing drastic cuts in production, meaning seven million barrels that could be shipped to markets every day are being left in the ground.

In addition, Saudi Arabia has volunteered to cut its own output by one million barrels per day (bpd) to help avoid oversupplying a market suffering from a collapse in demand due to the coronavirus pandemic.

The cuts were aimed at avoiding limited storage capacity being saturated and supporting prices — currently hovering around $60 per barrel.

– Russian optimism –
Market analysts had widely tipped OPEC+ to roll over the production cuts for another month, especially as more nations are experiencing an upswing in Covid cases.

Russia’s Deputy Prime Minister Alexander Novak was more optimistic in his opening comments.

“The evolution of the vaccination campaign is making progress and allows us to look towards the future with optimism, even if, of course, we shouldn’t forget that there remain many uncertainties ahead,” Novak was quoted as saying by Ria Novosti news agency.

“We also note that the economy continues to improve,” he added.

But with Europe returning to lockdown and infections sweeping through India, a country that until the pandemic was an important source of demand growth, experts are now seeing a slower recovery for the crude market.

The International Energy Agency (IEA) reflected this more downbeat outlook in forecasts contained in its last report this month.

It estimated that global demand could take another two years to get back to its pre-crisis levels.

Benchmark crude contracts Brent and WTI were both up nearly 2 percent as the OPEC meeting got underway.

Reps, Ministry Of Finance Disagree Over N2.8bn Payment To OPEC

 

The House of Representatives and the Ministry of Finance on Tuesday disagreed over the procedure for the payment of the sum of N2.8billion to the Organization of Petroleum Exporting Countries (OPEC) in 2017.

The Ministry appeared before the Public Accounts Committee of the House in the ongoing investigative hearing on audit queries by the Auditor-General of the Federation on Ministries Departments and Agencies (MDAs).

Permanent Secretary of the Ministry, Aliyu Ahmed, said the payment was made by the Minister following a memo by OPEC requesting the said amount.

Ahmed said the amount was released from the office of the Accountant General as payment of Nigeria’s contribution to the OPEC fund for international development in 2017.

READ ALSO: ‘We’ll Continue To Work For National Stability’; President Buhari Assures Nigerians

Members of the Committee disagreed that the Minister could release such an amount of money without recourse to the President.

Ahmed said payment to international organizations are not guided by the Procurement Act.

He said it was a routine payment and there are hundreds of international organizations, so if they had to resort to the president for every approval, it would be unmanageable and cost more.

He added that this has been the practice over time.

The members vehemently opposed this saying that it had been done over time does not make it right and such payments must be approved by the President.

Chairman of the Committee, Hon Wole Oke, said the approval from the Presidency for such sum would be apt

“Probably an approval from Mr. President from FEC for this large sums of money would have been apt. Your submissions are apt. We know where the money is coming from and where it went to. What we are saying and for the Auditor-General to have raised it, there must have been an issue,” he said.

He ruled that in the future, the Ministry should obtain a memo and presidential approval before taking such amounts.

“For a minister to dip her hands into the Treasury for whatever purposes and take N2.8 billion is not friendly. The expenditure was the right cause. It was a responsibility that we undertook to bear. But just the procedure. Maybe a memo. It was not procedural. Until this act is amended, your Minister is still the chief procurer. What would it cost her to take a memo to FEC to get approval?” he said.

OPEC, Allies To Meet To Thrash Out Cuts Deal

In this file photo taken on November 29, 2016, the logo of OPEC is pictured at the OPEC headquarters on the eve of the 171th meeting of the Organization of the Petroleum Exporting Countries in Vienna, Austria. JOE KLAMAR / AFP
In this file photo taken on November 29, 2016, the logo of OPEC is pictured at the OPEC headquarters on the eve of the 171th meeting of the Organization of the Petroleum Exporting Countries in Vienna, Austria. JOE KLAMAR / AFP

 

The members of the OPEC group of oil producers will meet with their allies Thursday to see if they can reach an accord on extending production cuts over the coming months.

The video-conference meeting was pushed back from Tuesday and comes after three days of inconclusive discussions among the 13 members of OPEC proper.

Observers say the postponement points to an agreement being harder to reach than initially thought.

The meeting was originally scheduled for 1300 GMT but the start was delayed by an hour.

The first wave of the coronavirus pandemic sent oil demand — and prices — plummeting in the spring, with the benchmark American contract even going into negative territory for the first time in history.

After tough negotiations in April, OPEC+ — which includes Russia — agreed on drastic production cuts in order to try to put a floor under oil prices.

Despite hitting producers’ revenues hard, those cuts did help drag prices back up again.

However, the second wave of the pandemic has dashed hopes of a rapid “V-shaped” recovery for the economy and for oil demand.

READ ALSO: Former US Presidents Ready To Publicly Receive COVID-19 Vaccine

Most producers, including OPEC kingpin Saudi Arabia, therefore favour an extension of the current agreement, which entails a cut of 7.7 million barrels per day (bpd) and was scheduled to be eased to 5.8 million bpd on January 1.

“OPEC and allies are said to be leaning towards a rollover of current cuts with a gradual increase in output,” according to analyst Neil Wilson from Markets.com.

“Whether the easing would begin in January or after the three-month delay discussed before the meeting is unclear,” wrote Stephen Innes of Axi.

After rising on Wednesday on hopes of a deal and after the UK’s approval of a coronavirus vaccine, prices for both the US crude oil benchmark West Texas Intermediate (WTI) and Europe’s Brent North Sea were down slightly on Thursday at $45.13 and $48.15 respectively.

– Thorny subjects –

Markets were expecting producers to be able to agree on an extension of three to six months, with many viewing Monday’s meeting as a formality to sign it off.

But a recent surge in crude prices — up by 25 percent over the course of November — together with positive news from several companies on coronavirus vaccines means some countries may need more convincing of the need for further sacrifices.

Meanwhile, the perennially thorny subject of whether all members are respecting production quotas laid down in previous agreements seems to once again be on the table.

Some insist that those who are currently overproducing be made to comply before further restrictions are imposed.

“It is unlikely that the strict implementation of the agreed cuts… will be achieved, which will undermine their effectiveness and confidence in the group,” according to Eugen Weinberg of Commerzbank.

The cartel will also have to pay attention to developments in the three members which have been granted exemptions from quotas — Libya, Iran and Venezuela.

Libya’s production had been almost wiped out by civil conflict but has spiked since October and now stands at over one million bpd, according to the country’s National Oil Corporation (NOC).

In the longer term, Iran’s offer on the oil market may also increase if the incoming US administration pursues a policy of detente with Tehran and relaxes sanctions.

That would lead hundreds of thousands of barrels coming on to the market, exerting a fresh downward pressure on prices.

AFP

OPEC, Allies Meet To Discuss Oil Production Cuts

In this file photo taken on November 29, 2016, the logo of OPEC is pictured at the OPEC headquarters on the eve of the 171th meeting of the Organization of the Petroleum Exporting Countries in Vienna, Austria. JOE KLAMAR / AFP
In this file photo taken on November 29, 2016, the logo of OPEC is pictured at the OPEC headquarters on the eve of the 171th meeting of the Organization of the Petroleum Exporting Countries in Vienna, Austria. JOE KLAMAR / AFP

 

The members of the OPEC group of oil producers will meet with their allies Thursday to see if they can reach an accord on extending production cuts over the coming months.

The video-conference meeting, scheduled to start at 1300 GMT, was delayed from Tuesday and comes after three days of inconclusive discussions among the 13 members of OPEC proper.

Observers say the postponement points to an agreement being harder to reach than initially thought.

The first wave of the coronavirus pandemic sent oil demand — and prices — plummeting in the spring, with the benchmark American contract even going into negative territory for the first time in history.

After tough negotiations in April, OPEC+ — which includes Russia — agreed on drastic production cuts in order to try to put a floor under oil prices.

Despite hitting producers’ revenues hard, those cuts did help drag prices back up again.

READ ALSO: Finance Bill 2020 Passes Second Reading In Senate

However, the second wave of the pandemic has dashed hopes of a rapid “V-shaped” recovery for the economy and for oil demand.

Most producers, including OPEC kingpin Saudi Arabia, therefore favour an extension of the current agreement, which entails a cut of 7.7 million barrels per day (bpd) and was scheduled to be eased to 5.8 million bpd on January 1.

“OPEC and allies are said to be leaning towards a rollover of current cuts with a gradual increase in output,” according to analyst Neil Wilson from Markets.com.

“Whether the easing would begin in January or after the three-month delay discussed before the meeting is unclear,” wrote Stephen Innes of Axi.

After rising on Wednesday on hopes of a deal and after the UK’s approval of a coronavirus vaccine, prices for both the US crude oil benchmark West Texas Intermediate (WTI) and Europe’s Brent North Sea were down slightly on Thursday at $45.13 and $48.15 respectively.

Thorny subjects

Markets were expecting producers to be able to agree on an extension of three to six months, with many viewing Monday’s meeting as a formality to sign it off.

But a recent uptick in crude prices — up by 25 percent over the course of November — together with positive news from several companies on coronavirus vaccines means some countries may need more convincing of the need for further sacrifices.

Meanwhile, the perennially thorny subject of whether all members are respecting production quotas laid down in previous agreements seems to once again be on the table.

Some insist that those who are currently overproducing be made to comply before further restrictions are imposed.

“It is unlikely that the strict implementation of the agreed cuts… will be achieved, which will undermine their effectiveness and confidence in the group,” according to Eugen Weinberg of Commerzbank.

The cartel will also have to pay attention to developments in the three members which have been granted exemptions from quotas — Libya, Iran and Venezuela.

Libya’s production had been almost wiped out by civil conflict but has spiked since October and now stands at over one million bpd, according to the country’s National Oil Corporation (NOC).

In the longer term, Iran’s offer on the oil market may also increase if the incoming US administration pursues a policy of detente with Tehran and relaxes sanctions.

That would lead hundreds of thousands of barrels coming on to the market, exerting a fresh downward pressure on prices.

 

AFP

OPEC Turns 60 At ‘Critical Moment’ For Virus-hit Oil

In this file photo taken on November 29, 2016, the logo of OPEC is pictured at the OPEC headquarters on the eve of the 171th meeting of the Organization of the Petroleum Exporting Countries in Vienna, Austria. JOE KLAMAR / AFP
In this file photo taken on November 29, 2016, the logo of OPEC is pictured at the OPEC headquarters on the eve of the 171th meeting of the Organization of the Petroleum Exporting Countries in Vienna, Austria. JOE KLAMAR / AFP

 

OPEC faces a critical moment in its 60-year history with the coronavirus crushing crude demand and prices, discord among its members, and threats from a world seeking cleaner fuels.

Founded on September 14, 1960, by Iraq, Iran, Kuwait, Saudi Arabia and Venezuela who sought to control crude oil output, OPEC currently comprises 13 members including nations from Africa and Latin America.

The 60th anniversary “comes at a critical moment in its history”, UniCredit analyst Edoardo Campanella said in reference to the Organization of the Petroleum Exporting Countries.

“Its ability to steer the oil market in its favour has never been put in question to the extent it is now,” he noted.

– ‘Relevant role’ –

The Vienna-based institution convenes for regular meetings to assess the state of supply and demand in the marketplace, and its pronouncements can still spark major price swings.

That ability has dimmed in recent years however, prompting it to join forces with ten non-OPEC producers including Russia to curb their collective output.

OPEC+ essentially wanted to counter surging energy supplies from shale rock in the United States and help clear a stubborn supply glut on world markets.

Today, OPEC pumps about one third of global oil — but OPEC+ accounts for almost 50 percent, giving it greater clout.

Carlo Alberto de Casa, trader at Activtrades, insisted that the cartel retains a “relevant” function in the market, dismissing talk the organisation was a “has-been”.

“They are slightly less influential compared to the past, also due to production of non-OPEC countries and new extraction techniques. But I still see a role for OPEC,” he told AFP.

This despite the larger OPEC+ in March failing to agree on a new strategy — with Russia refusing cartel kingpin Saudi Arabia’s request to cut their collective output and combat a virus-fuelled slump in crude demand.

In response, top global exporter Saudi slashed its prices and raised output to preserve market share in the face of Russian opposition.

The Saudi-Russian price war, in tandem with the worsening Covid-19 pandemic, sent oil prices off a cliff — and even caused New York’s light sweet crude contract to briefly turn negative in April — meaning producers paid buyers to take the oil off their hands.

After the unprecedented market crash, OPEC+ in May slashed up to a fifth of its output — a move that triggered a sharp rebound in crude prices to current levels around $40 per barrel.

Added to the supply backdrop, the United States, now the world’s biggest oil producer, curbed the pace of costly shale extraction.

Rystad Energy analyst Paola Rodriguez-Masiu, while noting that OPEC has lost market share in recent years, said the cartel still has an important role to play because it possesses the largest amount of accessible crude.

This meant that extracting its oil resulted in fewer carbon emissions, she said.

“I would argue that OPEC would become more and more important” in the future, she concluded.

AFP

Why Oil Prices Could Soon Skyrocket – UAE Energy Minister

 In this file photo taken on November 29, 2016, the logo of OPEC is pictured at the OPEC headquarters on the eve of the 171th meeting of the Organization of the Petroleum Exporting Countries in Vienna, Austria. JOE KLAMAR / AFP
In this file photo taken on November 29, 2016, the logo of OPEC is pictured at the OPEC headquarters on the eve of the 171st meeting of the Organization of the Petroleum Exporting Countries in Vienna, Austria. JOE KLAMAR / AFP

 

UAE Energy Minister Suheil al-Mazrouei said on Monday current low oil and gas prices are unsustainable and warned that if they last longer, it could lead to energy shocks.

Mazrouei said that “very good signs” of rising demand for oil have been seen in China and India, two of the world’s biggest crude consumers, and to some degree in Europe.

“This environment of low oil and gas prices, I don’t think it’s sustainable,” the minister said in a virtual interview hosted by the US-UAE Business Council.

Mazrouei said that if low oil prices persist for a long period, some of the current high-cost producers will drop out leaving a supply gap, pushing prices higher.

“We need someone to fill in that gap, otherwise we are going to have shocks in… prices and the last thing we want is to have shocks,” he said.

“We need to have stability and to have a reasonable and fair price.”

Brent crude crashed to multi-year lows under $20 a barrel and WTI (for May delivery) sank into negative territory in April for the first time in history  as demand slumped due to coronavirus lockdowns and a global supply glut.

The two benchmarks have recovered to around $40 a barrel after the OPEC+ producers alliance agreed to record production cuts of 9.7 million barrels per day in April, effective for two months starting May.

Earlier this month, the alliance extended the historic cuts through July as governments around the world ease unprecedented lockdowns in many countries.

Mazrouei said that although oil consumption has dropped to 2013 levels “we think things will go back to normal within one or two years.”

“Unless we have a second wave of Covid-19, I think we will see a demand recovery at a pace that is adequate to the cut we have done as… OPEC+, provided other producers do not rush and over-produce,” Mazrouei said.

Nigeria To Compensate For Overproduction As OPEC, OPEC+ Agree To Extend Oil Output Cuts

 

The Federal Government has agreed to make additional oil production cuts from July to September, after producing about 120,000 barrels per day more than its agreed quota for May and June.

The Organization of the Petroleum Exporting Countries (OPEC) members, led by Saudi Arabia and other key oil producers agreed on Saturday to extend historic output cuts through July, as oil prices tentatively recover and coronavirus lockdowns ease.

In a statement by OPEC, the 13-member cartel and its allies, notably Russia, decided to extend by a month further till July 31, it’s agreed 9.7 million barrels per day (bpd) cut in May and June.

“In light of these facts, and in view of current fundamentals, all member countries agreed to the five key elements in reaching their unanimous decision, which will be recommended to non-OPEC participating countries.

They 1.“reconfirmed the existing arrangements under the April agreement.

2. “Subscribed to the concept of compensation by those countries who were unable to reach full conformity (100 per cent) in May and June, with a willingness to accommodate it in July, August and September, in addition to their already agreed production adjustment for such months.

3. “Agreed to the option of extending the first phase of the production adjustments pertaining in May and June by one further month.

4. “Recognized that the continuity of the current agreement is contingent on them fulfilling elements 1 and 2 above.

5. “Agreed without dissent that the full and timely implementation of the agreement remains inviolable, based on the five key elements.

6. “The meeting, therefore, agreed unanimously to extend the first phase of the production adjustment agreed at the 10th (Extraordinary) OPEC and non-OPEC Ministerial Meeting for a further month, to now run from 1 May 2020 to 31 July 2020.

The Laggards

Countries like Nigeria and Iraq, who are regarded as the main culprits, did not comply with agreed output cuts, but the governments have agreed to deeper production cuts to meet up with the agreed quota.

Nigeria produced 120,000 barrels per day, beyond its quota, and Minister of State for Petroleum Resources, Timipre Sylva, said in a statement, Saturday that the federal government is ready to make additional oil output cuts from July to September.

Meanwhile, Iraq’s Ministry of Oil spokesperson, Assem Jihad, said in a statement, agreed to extra cuts but did not reveal how the government would reach agreement with oil majors on curbing output.

OPEC said all meeting participants agreed Saturday that countries that fell short of their production cut quotas so far were willing to make up for it in July, August and September.

Despite the difficulties, the output cuts have helped support oil prices, which rose to around $40 per barrel at the start of June for both the US benchmark, West Texas Intermediate (WTI), and Europe’s Brent North Sea contracts.

Around April 20, both had slumped to historic lows, with Brent falling as low as $15 and WTI briefly entering negative territory.

Saturday’s meeting had been originally scheduled for next week but was brought forward at the suggestion of Algeria’s Arkab.